What You Need to Know About The Future of Home Prices

The value of homes has increased rapidly over the last year, creating a historically competitive market. This has led to a lot of questions about the future of home prices for consumers. While experts predict real estate will continue to appreciate, there are signs that the rate of appreciation may be slowing to closer-to-normal levels in the coming years. The market still undoubtedly favors sellers’ and the demand for new homes continues to be high. A slower growth rate could bring relief to homebuyers who had put their searches on hold. The exact outcome has yet to be seen, but there is certainly exciting news on the horizon for homebuyers, sellers, and builders. Here is a round up of everything you need to know.

Current Housing Market and Home Prices 

Realtor.com shows that the number of homes available for sale inched up 5.7 percent in August. That follows 8.8% and 10.4% inventory gains, respectively, in June and July. Since bottoming out this spring, inventory is up 30 percent. – Fortune.com. Home prices skyrocketed 18.1% year-over-year in August, CoreLogic said; the fastest rate of price growth in at least 45 years. Buyers showed reluctance and now seem to be the ones with power. 

Asking prices for houses are being slashed. Bidders no longer have to waive inspections to win over sellers juggling multiple offers. Demand has slowed so much it’s like a light switch suddenly turned off, said Dominic Zimmer, a local Realtor. 

Across the U.S., home-price appreciation slowed for a second straight month in September as part of a modest cool-down, Zillow Group Inc. reported this week. The number of homes with price cuts is growing, with counties near Denver, Salt Lake City and Indianapolis seeing more than half of listings get reductions, according to Redfin.  Even some of the hottest areas where workers from large urban cities sprawled out to, such as the counties including Portland, Maine, and Tacoma, Washington, have had cuts on more than 40% of listings, Redfin data show. – Bloomberg

Home shoppers are finally showing some reluctance to pay top dollar.

This buyer hesitation was expected. After all, home prices can’t continue to grow at a 17% year-over-year rate indefinitely. At the end of the day, household budgets can stretch only so far. – Fortune

Where are prices headed next?

According to expert forecasting, price growth is expected to slow. Inventory will hit the market. 

Yahoo News

The consensus among the industry’s forecast models is that we’re headed for slower growth, albeit still positive. The weakest projection comes from real estate research firm CoreLogic, which is forecasting just a 2.7% appreciation in the coming 12 months. Meanwhile, John Burns Real Estate Consulting and Freddie Mac—which do calendar year forecasts—project home price growth of 4% and 5.3%, respectively, in 2022.

It all comes down to supply and demand. We’re in the middle of the five-year period during which the largest chunk of millennials, those born between 1989 and 1993, are hitting their thirties—the age when first-time home-buying really kicks into gear. Meanwhile, housing supply is simply outmatched. 

The second unknown is tied to the end of federal pandemic protections. At the end of September, the mortgage forbearance program—which currently protects 1.5 million homeowners—will begin to wind down.Some of those struggling borrowers could opt to sell their home. The latest forecast by Zillow estimates 25% of those forbearance mortgage holders will list their home. While that would certainly increase housing inventory, it wouldn’t fundamentally change the current market.


The reason that research firms like CoreLogic think prices can go higher boils down to demographics. We’re in the middle of the five-year period when the largest tranche of millennials, those born between 1989 and 1993, are hitting their thirties—the age when first-time home-buying really kicks into gear. Not to mention, the housing market is still benefiting from the perfect storm created by the pandemic: recession-induced low mortgage rates, coupled with remote workers who are willing to uproot in pursuit of affordable real estate.

But even with all this cooling, home prices are still expected to rise. CoreLogic, a real estate research firm, forecast a modest 3.2% nationwide appreciation in the coming 12 months. The National Association of Realtors is just a tiny bit more bullish, forecasting a 4.4% uptick.

According to the latest forecast put out by Fannie Mae, median home prices are expected to rise 7.9% between the fourth quarter of 2021 and the fourth quarter of 2022. While that would mark a slowing from the extreme price growth we’ve seen this year, it would still represent strong growth by historical standards. (On average, U.S. home prices have climbed 4.1% on an annual basis since 1987.) So, put another way: The housing market, at least in the eyes of Fannie Mae, is set to return to a normal-ish level of price appreciation. 

In the coming 12 months, Zillow foresees U.S. home prices jumping 13.6 percent.  Goldman Sachs expects home prices to swing up a staggering 16% by the end of 2022. But not everyone sees the frenzy continuing. CoreLogic, is far more bearish—forecasting just 2.2% home price growth over the coming 12 months. All of these forecasts should, of course, be taken with a grain of salt. After all, at the onset of the pandemic—when some states had banned in-person real estate viewings—CoreLogic forecast prices would fall 1.3% between April 2020 and April 2021. For that same 12-month period, Zillow predicted home prices would fall between 2% to 3%. Not only did the housing market not slide backward, it went on one of the biggest runs in U.S. history.

Industry professionals continue to keep a close watch on home prices, inventory, and mortgage rates as we move into 2022. If you are a hesitant buyer or a curious seller, reach out to me to come up with a strategy. No matter how the market shifts, it is in your best interest to be prepared and ahead of the game. 

*This article is intended to be accurate, but the information is not guaranteed. Please reach out to us directly if you have any specific real estate or mortgage questions or would like help from a local professional. The article was written by Sparkling Marketing, Inc., with information from resources like Fortune, Bloomberg, Fannie Mae, CoreLogic, Realtor.com, and Yahoo News.